U.S. Cap And Trade Must Take Back Seat: Executives

Date:29-Jan-10Author: Martin Howell and Gerard Wynn

Switzerland - Business executives and policy officials said a U.S. cap and trade scheme must give way to a clean energy law, after U.S. President Barack Obama favored "green jobs" in his State of the Union Address.

Cap and trade works by limiting carbon emissions from polluters, which then pass on the extra cost to consumers. That model is proving a hard sell during a slow U.S. economic recovery.

Obama said on Wednesday he wanted to create more clean energy jobs and supported a "comprehensive energy and climate bill" in the Senate. But he didn't mention cap and trade.

The U.S. House of Representatives passed a climate bill last year, featuring a cap and trade scheme, and is awaiting the passage of a similar Senate draft.

"I don't think that the House bill that passed will even be considered this year in the Senate," said Tom Donahue, President of the U.S. Chamber of Commerce, noting that it was an election year and there were so many other priorities, including Obama's latest jobs plan.

"We are in search of a solid domestic bill, whether its cap and trade or cap and carbon tax or however these things are put together. We just don't want a bill like the one that came out of the House," he told Reuters on Thursday on the sidelines of a business and policy summit in the Davos Swiss ski resort.

The industry looby group ran a high-profile campaign against the House climate bill, losing some members as a result, but even businesses with big investments in green technology are now calling for a backing from cap and trade for now.

"There is so much on the plates of politicians and regulators in the United States it is hard for me to envisage a strong movement to have a cap and trade system in place in the next eight or nine months," said John Rice, a vice chairman of General Electric Co, who also serves as chief executive of its GE Technology Infrastructure division.

GE is a top wind turbine manufacturer and also has investments in solar.

"I would worry if we tried to push it through in this environment we would end up with a very incomplete solution, and I think it is more important that we are thoughtful about it and if we do it, we do it correctly," Rice said.

"You can see in the U.S. we are getting a backlash in a lot of areas and I just don't think it would be helpful."

The House bill passed a scheme which would force polluters to buy carbon emissions permits from an economy-wide quota which would be ratcheted down, to drive carbon cuts.

"It's the dumbest idea," said Timothy Wirth, former U.S. senator and now President of the U.N. Foundation, on the idea of forcing businesses to buy emissions permits.

He expected a modified scheme to pass eventually which may apply only to utilities without enforced permit auctions.

In the near term, analysts expected the United States to pass a slimmer energy bill without cap and trade, focused instead on targets for renewables and nuclear power.

"I do not believe that there will be legislation on climate any time soon in the U.S., but they will address clean energy and that will have very good benefits for the climate," said Bjorn Stigson, president of the World Business Council for Sustainable Development, a green business lobby.